753C Payment and receipt of dividends or interest and manufactured payments under a stock borrowing or repurchase agreement.

(1) In this section, “specified amount” refers to an amount of interest or distribution arising or accruing to a stock buyer in respect of qualifying securities, or equivalent stock, held by the stock buyer pursuant to a financial transaction.

(2) Subject to subsection (3), in charging a specified amount to tax—

(a) a deduction shall be available for any corresponding manufactured payment paid, and

(b) such deduction shall not exceed the specified amount received following the application of Schedule 24, but prior to the application of Schedule 2.

(3) A manufactured payment shall not be deductible—

(a) where the stock buyer is exempt from tax in respect of the corresponding specified amount,

(b) where no amount of tax payable, within the meaning of section 959A, would arise in respect of the corresponding specified amount following the application of Schedule 24, or

(c) against any amounts other than the corresponding specified amount.

(4) Where the specified amount is in excess of the amount of any corresponding manufactured payment paid, then, notwithstanding Part 2, section 129, section 129A or section 138, that excess amount shall be charged to tax pursuant to section 753B(2)(b).

(5) Subject to subsection (6), a stock seller shall be charged to tax in respect of a manufactured payment arising or accruing as if the corresponding specified amount had been received directly by that stock seller.

(6) Where the amount of the manufactured payment made by the stock buyer is in excess of the amount of the corresponding specified amount received by the stock buyer, net of any foreign withholding tax but prior to the application of Schedule 2, then the stock seller shall be chargeable to tax under Case IV of Schedule D in respect of that excess amount.